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Issues: (i) Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is taxable under section 56(2)(viii) of the Income-tax Act, 1961 read with section 145B(1), or whether it retains the character of compensation governed by the pre-amendment position; (ii) whether the assessee was entitled to exclude the receipt from income while still claiming TDS credit and, alternatively, fifty per cent deduction under section 57(iv).
Analysis: The amendment introduced by the Finance (No. 2) Act, 2009, with effect from 01.04.2010, created a specific charging mechanism for interest received on compensation or enhanced compensation, by bringing it under the head "Income from other sources" and taxing it on receipt basis. The earlier position under the law, including the ruling in Ghanshyam (HUF), governed the regime before that amendment. The Tribunal held that the post-amendment statutory scheme prevails for the assessment year in question, and that the character of the receipt under the Land Acquisition Act cannot override the express charge created by the Income-tax Act. It further held that the assessees' reliance on earlier decisions was misplaced for the post-amendment years, and that the plea of per incuriam could not be accepted against binding High Court decisions. In view of the specific statutory inclusion, the alternative claim for exclusion from tax failed, and the assessee could not simultaneously claim exemption from income while retaining the corresponding TDS credit position.
Conclusion: The interest on enhanced compensation was held taxable under section 56(2)(viii) read with section 145B(1), and the assessee's challenge was rejected.
Final Conclusion: The Tribunal upheld the post-2010 taxability of interest on enhanced compensation as income from other sources, dismissed the assessee's appeals, and sustained the Revenue's stand.
Ratio Decidendi: For assessment years governed by the amended law from 01.04.2010 onwards, interest on compensation or enhanced compensation is specifically chargeable as income from other sources on receipt basis, and the earlier compensation-based characterisation cannot prevail over the express statutory mandate.
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